Crypto Weekly Outlook: December 6, 2021
The crypto market experienced a painful weekend as the hits kept coming after Friday’s fall. As of this writing, the total crypto market cap is sitting at $2.28T according to CoinMarketCap. Before the drop on Friday, it was above $2.6T, meaning over $300B of value has disappeared. At one point on Saturday, the total crypto market cap had even fallen to $2.02T. For perspective, just last month, it had reached the milestone of $3T - a volatile market indeed. Some analysts reasoned that the drop was due to a perfect storm of growing open interest in the derivatives markets along with positive funding and little weekend liquidity causing a cascade of forced selling. According to Glassnode, over $5.4B in Bitcoin futures were flushed out on Saturday, over 24% of the market.
The major shakeout drastically hit sentiment as well. The Crypto Fear & Greed Index, as of this post, has fallen all the way to 16, extreme fear territory. It was sitting at the much less fearful 40 this time last week. The gauge hasn’t been this low since July. And the sentiment is impacting the market as currently 16 of the top 20 cryptocurrencies are in the red with most of the majors down 20% from last week. Despite the negative sentiment, according to Santiment, interest in “buy the dip” has spiked to a three month high, indicating that retail sees this sour lemon as an opportunity to make some sweet lemonade. However, investors should still be wary of external macro factors such as the looming default (yes...again) of Chinese behemoth Evergrande.
Bitcoin (BTC) certainly had a tough weekend. It fell to a low of $42,000, down 27% in a day but it has since recovered to the upper $40K’s - albeit still down about 15% from last week. During the thin weekend trading, it even briefly hit $28K on the Huobi Global exchange. It seems the whales contributed to the shakeout as they had moved $320M worth of Bitcoin to the Coinbase exchange prior to the major drop. Bitcoin has also lost its milestone of a $1T market cap with it now having fallen to around $930B. Most analysts are now re-assessing their forecasts for a blow-off top to end the year. Crypto analyst William Clemente has stated that his base case is further consolidation and range-bound trading for the remainder of the year before the bulls take back the reins in Q1. However, analyst Michael Van de Poppe noted that BTC is still in a bull market and that the correction is likely behind us.
Technically speaking, Bitcoin has strong support at the $40K level and at the $44,275 area which is also the 0.618 Fib retracement support level. Above that, there is support at $45K. Resistance is present at the crucial $50K level as well at $50,900 and $52,500. To go higher, the bulls will have to recapture the key $53K area corresponding to the $1T market cap. Above that, there is the 20D EMA at $56, 219. The bears appear to be in control, but with sentiment falling so low and major analysts lowering expectations, who knows how the year will finish? Bitcoin is trading at $49,300 as of this writing.
Ethereum (ETH) performed remarkably better than big brother Bitcoin during the fallout. Even though ETH fell to a low of $3,470 (Bitstamp), it was able to recover most of its losses and retake the $4K level. Analysts have been pointing out Ethereum’s potential to significantly outperform Bitcoin since last week when Ethereum moved above 0.08 BTC on the ETC/BTC chart - a key technical breakout. The altcoin leader is only down around 8% from last week, much better than Bitcoin. Analyst “Smart Contracter” has stated that Ethereum is primed for a monster rally vs Bitcoin with the next stop for the pair being 0.1 BTC and then 0.14 BTC. Additionally, the analyst believes that after the strong pull back, ETH is ready to proceed to new all-time highs against the USD. Even crypto strategist “Credible” is bullish on ETH as long as the 0.075 BTC cross rate is held. The smart contract leader could also be helped by the fact that the ETH balance held on central exchanges has just hit a three-year low according to Glassnode, further limiting circulating supply.
On the technical side, support is present at $3,400, $3,500, $3,824, $3,950, and the critical $4K level. Resistance exists at the 61.8% Fibonacci retracement level at $4,215 as well as at $4,250, the 20D EMA at $4,326, $4,654, and the all-time high at $4,868. ETH is trading at $4,202 as of this writing.
Cardano (ADA) wasn’t spared from the weekend bloodbath as it has fallen through many key support levels. This, despite the fact that its fundamentals seem to be growing stronger by the day. Just last week, it hit 20 million transactions without a single outage. Its Plutus language is being seen by many as having strong security advantages in an environment where even heavy weight Solana is not immune to potentially major security vulnerabilities. It recently reached the milestone of over one million wallets staking ADA with the benefit that these staked coins can be unstaked and transferred at any time unlike the case with Ethereum’s stakers. Furthermore, the Cardano-based DEX SundaeSwap finally launched its public testnet on Monday, allowing Cardano to prepare for the DeFi space. There are many haters of ADA due to its market cap relative to its developer activity, but the activity seems to be growing. Even analyst Michael van de Poppe believes ADA can shoot higher, but first it needs to break above $1.46 and $1.78 he says.
On the technical side, ADA has support at $1 and at the $1.25-$1.30 area. Resistance is present near $1.50 and $1.70. The bears have held ADA’s reins for a good while, but the growing fundamentals could embolden the bulls going forward. ADA is trading at $1.36 as of this writing.
What’s the story with Shiba Inu (SHIB)? With retail seemingly losing interest, it remains the most held asset amongst the large ETH whales despite it also feeling the hurt over the weekend. Do the whales know something we don’t or is it just their favorite crypto to pump? They have been continuing to buy following each dip. One reason may be due to Shiba’s rumored foray into the metaverse guided by the steady hand of former VP of Activision William Volk. Shytoshi Kusama, one of SHIB’s leading developers, has called this rumored development, known as the Shiboshi game, the “future of gaming.” It is expected that the fees generated from the game will enable Shiba Inu to burn more of its tokens. Investors should certainly pay attention to this gaming & metaverse development as it could be the catalyst that transforms SHIB from being just another meme currency. SHIB is trading at $0.0000356 as of this writing.
Polygon (MATIC) was a big winner last week, but also took some punches over the weekend. Despite the storm, MATIC seems to still have the wind at its back as it recovered a good deal of the losses with market excitement intact. Investors should be paying attention to its ZK Summit on December 9th where developers will discuss the “current state and future of zk-STARKs and applications of zero-knowledge proofs.”
MATIC has strong support at its 100D SMA at $1.54 and at its 50D SMA at $1.76. Then there is further support around its 20D EMA at $1.85. This area is crucial to hold according to Michael van de Poppe. Resistance is present at the 78.6% Fibonacci retracement level at $2.21 and at $2.40 and at the all-time high of $2.70. MATIC is trading at $2.17 as of this writing.
Alpha Finance Labs (ALPHA) should have an interesting week as well. On December 10th at 14:00 UTC, AlphaX, a DeFi derivative platform originally built on Ethereum, is set to launch its Avalanche blockchain. AlphaX is known for its Strike token that enables traders to trade based on floor and ceiling prices. ALPHA is trading at $0.75 as of this writing.
Traders should also know that several top crypto executives are expected to testify before the House Financial Services Committee on December 8. The purpose of the hearing is to “understand the challenges and benefits of financial innovation with regard to digital assets.” Sam Bankman-Fried, CEO of crypto exchange FTX (FTT) will likely appear, as well as Denelle Dixon, CEO of Stellar Development Foundation (XLM).
Also on the lookout is the release of November inflation data in the US on December 10th. Higher than expected numbers could persuade the Fed to accelerate the pace of their tapering, implying tighter monetary policy.
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